Hollywood goes globalBigger abroad

THE film-awards season, which reaches its tearful climax with the Oscars next week, has long been only loosely related to the film business. Hollywood is dedicated to the art of funnelling teenagers past popcorn stands, not art itself. But this year's awards are less relevant than ever. The true worth of a film is no longer decided by the crowd that assembles in the Kodak Theatre—or, indeed, by any American. It is decided by youngsters in countries such as Russia, China and Brazil.

Hollywood has always been an international business, but it is becoming dramatically more so. In the past decade total box-office spending has risen by about one-third in North America while more than doubling elsewhere (see chart). Thanks to Harry Potter, Sherlock Holmes and “Inception”, Warner Bros made $2.93 billion outside North America last year, smashing the studio's previous record of $2.24 billion. Falling DVD sales in America, by far the world's biggest home-entertainment market, mean Hollywood is even more dependent on foreign punters.

The rising foreign tide has lifted films that were virtually written off in America, such as “Prince of Persia” and “The Chronicles of Narnia: the Voyage of the Dawn Treader”. Despite starring the popular Jack Black (pictured), “Gulliver's Travels” had a disappointing run in North America, taking $42m at the box office so far. But strong turnout in Russia and South Korea helped it reach almost $150m in sales elsewhere. As a result, it should turn a profit, says John Davis, the film's producer.

The growth of the international box office is partly a result of the dollar's weakness. It was also helped by “Avatar”, an eco-fantasy that made a startling $2 billion outside North America. But three things are particularly important: a cinema boom in the emerging world, a concerted effort by the major studios to make films that might play well outside America and a global marketing push to make sure they do.

Russia, with its shrinking teenage population, is an unlikely spot for a box-office boom. Yet cinema-building is proceeding apace, and supply has created demand. Last year 160m cinema tickets were sold in Russia—the first time in recent years that sales have exceeded the country's population. Ticket prices have risen, in part because the new cinemas are superior, with digital projectors that can show 3D films.

The big Hollywood studios are muscling domestic film-makers aside. In 2007 American films made almost twice as much at the Russian box office as domestic films—8.3 billion roubles ($325m) compared with 4.5 billion. Last year the imported stuff made some 16.4 billion roubles: more than five times as much as the home-grown product, estimates Movie Research, a Moscow outfit. Earlier this month Vladimir Putin, Russia's prime minister, said the government would spend less money supporting Russian film-makers and more on expanding the number of screens.

Growth is much quicker in China, where box-office receipts reached $1.5 billion last year. China's regulator has claimed that cinema screens are going up at a rate of three per day; some are IMAX screens that command higher ticket prices. The government allows only 20 non-Chinese films into the market each year, virtually guaranteeing big audiences for those that make the cut. Punters and censors alike warm to family films and movies that seem to reflect China's central place in the world. Thus, expect long queues for “Kung Fu Panda 2” this summer.

Unfortunately, Hollywood has learned (as have many other industries) that great sales in China do not always translate into great profits. In America distributors tend to receive 50-55% of box-office receipts, with the rest going to the cinemas. Elsewhere the average take is 40-45%. In China, where Hollywood must use a domestic distributor, the proportion is roughly 15%. American films may be yanked in favour of domestic ones (“Avatar” had to make way for “Confucius” last year). The World Trade Organisation has ordered China to reform, but few moguls expect it to.

Growing fears of piracy have led studios to release films almost simultaneously in many countries; increasingly, the premiere takes place outside America. That changes the marketing game, says Michael Lynton, head of Sony Pictures. Studios used to rely on rumours of American success seeping out of the country, priming audiences elsewhere to see a film. Now they must conduct co-ordinated global campaigns. These are more expensive and tougher on the talent. Stars are corralled for two-week-long marketing blitzes that may take them to ten countries—“like a political campaign”, says Mr Lynton. Actors who are willing to do this (such as the indefatigable Mr Black) may find themselves working more regularly.

The success of a film outside America is not purely a marketing matter. As foreign box-office sales have become more important, the people who manage international distribution have become more influential, weighing in on “green-light” decisions about which films are made. The studios are careful to seed films with actors, locations and, occasionally, languages that are well-known in target countries. Sony cites the foreign success of “The Green Hornet” (Taiwanese hero, Austrian-German villain) and “Resident Evil: Afterlife” (Japanese location) as evidence of that strategy.

Big noisy spectacle travels best. Jason Statham, the close-cropped star of many a mindlessly violent film, is a particular Russian favourite. Films based on well-known literature (including cartoon books) and myths may also fare well. Films that trade on contemporary American cultural references are about as popular abroad as an oil slick on a NASCAR track. (Note to our non-American readers: NASCAR is an American sport involving fast cars.) Comedy travels badly, too: Will Ferrell and Adam Sandler provoke guffaws at home but incomprehension abroad. As the market swings away from America, funny films are less likely to find financing or broad distribution anywhere. “You won't see us doing a lot of comedies,” says Brad Grey, head of Paramount Pictures.

The growing internationalisation of the film business suits the biggest outfits, and not just because they can afford explosions. The major studios' power lies not so much in their ability to make good films—plenty of smaller operations can do that—but in their ability to wring every possible drop of revenue from a film. With their superior global marketing machines and their ability to anticipate foreign tastes, they are increasingly dominating the market. For everyone else, there is a chance to win a gold statue.

This article appeared in the Business section of the print edition under the headline "Bigger abroad"